Canadian Perspective on the 2008 U.S. Financial Crisis

As published in Humanist Perspectives: Part 1 - Summer 2013 / Part 2 - Autumn 2013 and National Library of Australia

In spite of Goldman’s Sach’s shameless conduct in the recent U.S. credit crisis, President Obama has delivered a message yesterday to both Americans and Canadians by appointing Goldman Sachs partner Bruce Heyman as ambassador to Canada. Obama has consistently surrounded himself with Wall Street-connected financial advisors and tasked these architects of misfortune with repairing the very damage they wrought using the same methods that caused the original crisis. Such deluded conduct has often been defined as a form of insanity. Heyman is currently responsible for Canadian Goldman Sachs operations and, according to Washington financial consultant Paul Frazer, “…having someone with an affinity for what Canada is about and what the Canadian economy is about provides a good base on which to start.” (Ottawa Citizen: April 4, 2013.)

His comments lead me to wonder about exactly what he thinks Canada and its "economy" is “about” ? I very much doubt if Heyman’s take on Canada would be comforting to working Canadians with minimal leverage in the stock market. Instead, I surmise that Mr. Heyman would be very pleased with the fact that,

…Canadian and U.S. capital are increasingly integrated, which is bringing elites closer together…Canadian policies, particularly under Stephen Harper…are not just drawing closer to U.S. policies but in some cases even going beyond them in extremism. Canada is becoming less and less of an independent country in many respects, culturally, economically, and politically. It’s increasingly embedded within the U.S. – run system as a kind of client state. (Chomsky: 2013.)

It can be argued that Cold War realities made it inevitable that Canada would become an integrated U.S. client state along the lines of Britain and Israel. Indeed, Canada has gladly, “held the bully’s coat” as Linda McQuaig wrote in her book of the same name. This military and economic integration naturally led to the current fiscal arrangement that sees representatives of Goldman Sachs and other investment behemoths filling elite government posts in Canada and the U.S. with people like former Goldman Sachs banker Mark Carney. Mr. Carney, former Bank of Canada governor; is now at the helm of the Bank of England. The origin of his unidentified replacement is largely predictable.

Mark Carney’s Belated Regulatory Conversion

Prior to recent news that Canada’s big six banks, “…are riding high after another blowout quarter driven by Canadian consumer’s seemingly unstoppable appetite for debt, especially mortgages…”, (Ottawa Citizen: Feb. 6, 2013.), outgoing Bank of Canada governor Mark Carney told a group of business students at the Richard Ivey School of business that, “Bonds of trust between banks and their depositors, clients, investors and regulators have been shaken by the mismanagement of banks, and on occasion; the malfeasance of their employees.” (Epoch Times: Mar.1-6, 2013.)

The new governor of the Bank of England then continued his philosophizing with a moralistic analogy about the value of trust, virtue and what he called the four Cs: core values, capital, clarity, capitalism and connecting with clients. Actually, that’s five Cs but perhaps he wasn’t counting the clients. The former Goldman Sachs man seemed to hint that perhaps the foundation of capitalism; the famously rational but self-interested individual; might also embrace an ethical approach to business. “Virtue cannot be regulated…” he opined; before commenting on the need to support financial regulation with a strengthened morality. One might ask: where were Carney’s moral admonishments in 2008 when the U.S. economy was imploding under the weight of toxic financial practices and rampant greed?

To his credit, Carney had recently advocated increasing regulation for Canadian and international banks to hopefully avoid a Canadian version of ongoing U.S. concerns. Canada’s financial regulator announced in a March 27, 2013 Ottawa Citizen article that the nation’s six big banks are “systemically important” and the Canadian Banker’s Association has belatedly agreed to accept the necessity of, “stabilizing and strengthening the global financial situation…” although previously, these bankers had strenuously opposed increased regulation; calling it an impediment to free market values and open competition. Since the big six banks enjoy a virtual financial monopoly in Canada; they could only be referring to the international scene since they also cited the Basel international regulatory consensus as part of the reason for their change of heart on regulation. “The long anticipated move brings Canada more closely in line with so-called Basel III banking rules hammered out by international regulators following the global financial crisis.”(Ibid.)The great danger for Canadian taxpayers is of course, the likelihood that this, “too big to fail” announcement will eventually lead to U.S. style bailouts for Canada’s banks that exceed the already generous public support enjoyed by the nation’s major lenders.

Both the Harper government and Canada’s chartered banks would have us believe that these institutions weathered the 2008 U.S. credit crisis on their own merits. While working Canadians took a financial beating the banks were actually given a generous public handout. The Canadian public generously if unwillingly lent billions to Canada’s charted banks during the recent economic downturn of 2008-2010. According to the Canadian Centre for Policy Alternatives (CCPA), “Canadian banks received up to $114 billion in government financial support at the height of the global financial crisis. The Canadian Mortgage and Housing Corporation provided $69 billion to take over mortgages for the banks.”

Part of the reason for the relative health of Canadian brokerage houses following the global meltdown was, according to Bruce Livesey in Thieves of Bay Street, “…the fact that, unlike U.S. investment firms; most of the big Bay St. brokerage houses were [are] owned by the banks…unlike Wall Street investment firms like Bear Stearns, Merrill Lynch and Lehman brothers, which had overleveraged, lacked deep pockets and therefore collapsed or were sold off to banks.” (Ibid.) and of course, many other firms were also major beneficiaries of massive U.S. government bailouts. While Canada’s manufacturing sector was wilting; the nation’s financial industry was taking full advantage of its misleading reputation for stability and integrity.

Not only does this stability owe much to the industry’s charging Canadians some of the highest banking and investment management fees in the world; a practice they can get away with because they constitute an oligopoly-a cartel, if you will…” (Ibid.)

The U.S. Credit Crisis: Background and Canadian Consequences

Perhaps Canada could learn at least one lesson from the United States government concerning business crime. The time has arrived for the Canadian government to treat stock market crime with the seriousness that U.S. authorities occasionally reserve for major-league fraudsters like former Goldman Sachs trader Matthew Taylor. Mr. Taylor’s crimes, had they been committed in Canada; would have resulted in a fine and a temporary trading ban rather than the, “…sentence of 33 to 41 months…” sought by U.S. prosecutors and detailed in an April 4, 2013 Globe and Mail story. Taylor was convicted of wire fraud over the fabrication of trades on the futures market to the tune of $8.3 billion that cost his employer over $118 million in losses. The fact that he excused his conduct by claiming he did it to, “augment his reputation” is an indictment of Goldman Sach’s corporate culture. It is not for nothing that Rolling Stone writer Matt Tabbe caustically described the firm as “…a vampire squid stabbing its blood funnel into anything that smells of money.” Canada’s financial crime enforcement regime is still trapped in an anemic provincial regulatory patchwork previously-crippled by major 1986 changes to the Competition Act as detailed by Peter C. Newman wrote in the October, 2008 issue of Canadian Business:

no provisions for class-action laws suits; corporate monopolistic conspiracies were so vaguely defined that they were just about impossible to prove; and prosecutions were moved from criminal to civil courts. It was the only time in the history of capitalism that any country allowed its anti-monopoly legislation to be written by the very people it was meant to restrain.

It was not that [subprime mortgage] lending was going on here, but the first public company [FMF Capital] loaded down with this kind of debt to explode was listed on the Canadian stock exchange. Its business was in the United States, but it was listed on the Canadian stock exchange. (Livesy)

Prior to the 2008 U.S. meltdown, “…the [Canadian] financial industry has [had] actively helped to destroy manufacturing companies in Canada and abroad. Perhaps the most pernicious development in this assault was the rise of private equity funds…Hedge fund managers swoop in on what they term “distressed” businesses, buy a controlling or significant interest, downsize them and invariably leave companies weaker and laden with debt, while workers are out of jobs and their pension plans gutted. Such activities enriched former U.S. Republican presidential candidate Mitt Romney.

This behavior has other negative effects on “long-term investment research and development” as well as reducing employment, eroding working conditions and investor protection and ultimately destabilizing financial markets. Beyond that, outsourcing North American manufacturing jobs to Asia has caused, “…the evaporation of well-paid, unionized manufacturing jobs and Canada’s employment picture is now dominated by the low-wage, non-exportable service sector.” (Ibid.) The drive to extract rather than create value has hidden behind the false promise of emancipatory globalization’s rising tide lifting all boats, as it were. Instead, lost manufacturing jobs in Canada have generated public sympathy for anti-union hysteria and Orwellian calls for right to work legislation. Manufacturer migration to low-wage environments is exemplified by the recent Caterpillar exodus from London, Ontario to a Michigan location. Typically, corporate pundits were quick to blame the unionized workers for being unrealistic in protesting the dubious “right to work for less.”

A proper examination of Canada’s economic difficulties requires an explanation of what actually caused the U.S. crisis. The U.S. crisis was originally caused by financial deregulation measures introduced in the late 1990s and early 2000s. According to Thomas B. Edsall in a review of economist Joseph Siglitz’s 2012 book, The Price of Inequality,
Siglitz and his allies argue that a free and competitive market is highly beneficial to society at large, but that it needs government regulation and oversight to remain functional. Without constraint, dominant interests use their leverage to make gains at the expense of the majority. Concentration of power in private hands, Siglitz believes, can be just as damaging to the functioning of markets as excessive regulation and political control.

Much to the horror of dissident economists like Nobel laureate Stiglitz; the Clinton administration repealed the Glass-Steagall Act in the early 1990s and also decided not to regulate the growing derivatives market. This law; which had had existed since the Great Depression, ensured clear separation between deposit-taking commercial banks and risk-taking investment banks. These decisions created the conditions for huge increases in personal debt and facilitated; according to Bruce Campbell of The Monitor:

the creation of mega-financial institutions like Citigroup and AIG, even faster growth of the shadowy banking world of hedge funds, private equity funds, investment banks, tax havens, etc., and the dramatic expansion of credit derivatives, credit default swaps, and other financial products.… This boom was overseen by Alan Greenspan, chairman of the U.S. Federal Reserve, who believed that markets knew best how to evaluate and manage risk without the heavy hand of regulation. Greenspan kept interest rates low and allowed a housing bubble and a stock bubble to develop. He supported unregulated sub-prime mortgage lending and derivatives. To his credit, Greenspon; later admitted the perhaps he had been wrong about the benefits of minimal regulation.

According to Campbell, the pre-crisis economic boom in the U.S. was fed by:
• the massive inflow of capital from surplus countries, notably the Asian and oil exporting countries
• the rapid growth in disposable income of the very rich -- aided by tax cuts and tax avoidance
• the resort to debt by low and middle-income American families
• the lure of home ownership by millions of people via unscrupulous mortgage contracts

It is difficult to blame working people for dreaming about home ownership although a certain amount of responsibility must lay at the feet of people who entered into mortgage arrangements clearly beyond their ability to pay. That being said, exacerbating these developments were the unscrupulous practices of major U.S. investment houses like Goldman Sachs, J.P. Morgan, Lehman Brothers and others who participated in the, “…agglomerating of mortgages of differing quality into opaque and shuffled bundles that led to the subprime mortgage crisis…” (Adbusters, 2009)

The political power and influence of Wall Street allowed it to successfully lobby for the course of financial deregulation that led to the development of ostensibly safe but incredibly complex financial instruments and abstruse mathematical models that created the bubble that eventually imploded so disastrously. As Campbell writes of the fundamental causes of the crash:

The first, securitized mortgage derivatives (also called collateralized debt obligations, or CDOs), were invented by a team at investment bank J.P. Morgan in the late 1990s. Individual mortgage loans were pooled and packaged into new cash-flow-producing assets – mortgage-backed securities — and then sold to investors. The other financial villain was credit default swaps (CDS). These insurance-like contracts — also invented by J.P. Morgan — were used by investors to hedge against default on their mortgage-backed derivatives... Secretive and largely exempt from regulation, these phony insurance contracts — which Warren Buffet called "financial weapons of mass destruction" — greatly magnified the credit derivative bubble.

Concerning the above matter, Canadian Finance Minister Jim Flaherty, in a March 21, 2013 Ottawa radio interview, described a 2009 phone call he received from U.S. Federal Reserve official Hank Paulson, who said, “Jim, we have a problem here that no one expected. Its subprime mortgages.” While Paulson’s ignorance and Flaherty’s surprise at this “news” is debatable, one thing is certain; J.P. Morgan and Goldman Sachs knew a great deal about subprime mortgages because they were busily insuring these phony insurance contracts in the certain knowledge that the bundled mortgages would fail.

Punishing Thrift and Rewarding Risk

Mark Carney and the Bank of Canada’s responded to the U.S. credit crisis by radically lowering interest rates as a way to stimulate Canadian borrowing and consumer spending. However; the bank made no allowances for those, mostly working people; who choose the conservative course of simply depositing their savings in a bank in the hope of earning a modest return.

Only recently has Finance Minister Flaherty moved to caution banks about what he called excessively-low borrowing rates. These cautionary warnings, recently echoed by Bank Governor Carney; have not succeeded in discouraging Canadians from plunging deeper in to debt and the world of market speculation. As Chris Sorenson wrote in the October 3, 2011 issue of MacLean’s, “Those who’ve opted to be austere with their personal finances have found themselves on the losing end as governments and central banks have worked to get people to borrow and spend…” In this atmosphere of low interest rates, “.., the dynamics of risk and reward have been [and continue to be] severely distorted.” (Ibid.)

A novel way to describe the hit taken by savers is,

…to measure the impact [by looking] at how much interest income is being lost as a result of low rates…with roughly $ 1.2 trillion on deposit at the banks and rates roughly three percentage points below their historical level; savers are losing out on $30 to $40 billion every year in interest income…this amounts to a massive subsidy for the country’s banks since the rate depositors are paid to part with their money is far less than what the banks can earn lending that money out…as mortgages…someone else as paying the price and its little old ladies and people on fixed incomes who can least afford it. (Ibid)

Canadian bank “Bail-ins”

Apparently, though; Canadian taxpayers needn’t fear a future of U.S.-style bank bailouts because the Harper government carefully buried what they call a “bank bail-in” plan in the latest federal budget. For undisclosed reasons the government has suddenly decided that it might be a good idea if Canadian banks took steps to protect themselves from market instability with their own money rather than depend on taxpayers like their U.S. counterparts. The frightening aspect of this revelation is its late and sudden arrival on the scene and the implicit suggestion that such measures were previously-absent from the calculations of both banks and government. Apparently this budget inclusion was a way of placating public fears about the government’s recent announcement that Canada’s major banks were “systemically-important.” Worse, rather than directly-legislated self-help for banks, the Harper government, as columnist Kate Heartfield wrote in the April 6, 2013 Ottawa Citizen, “…[the government] proposes that banks set aside rainy-day assets, which they would then use to shore themselves up if the worst happened.” I must ask, what will eventually happen if banks continue to avoid saving sufficient funds to weather inevitable rough patches?

Corporate pundits like Heartfield reflexively apply the term “conspiracy theory” to the thinking of anyone who dares voices dark suspicions about the intentions of Canada’s financial titans. For those who would lightly dismiss the idea that powerful interests actively conspire to marginalize the public, I offer the following remarks from dissident U.S. writer Norman Finklestein:

Although the explanatory value of conspiracy theories is marginal, this does not mean that, in the real world, individuals and institutions don’t strategize and scheme…Indeed, [accusation of] “conspiracy theory” has become barely more than a term of abuse to discredit a politically-incorrect sequencing of facts…

Perhaps she might also benefit from reference to the widely-quoted but mainly-unread Adam Smith who said,
…the people who own the society make policy. The people who own the place are the ‘merchants and manufacturers.’ They’re the ‘principal architects’ of policy, and they carry it out in their own interests, no matter how harmful the effects on the people of England [or in this case Canada]… (Smith in Chomsky: 2013.)

As Chomsky explains, “Power is no longer in the hands of ‘merchants and manufacturers’ but of financial institutions and multinationals. The result is the same.” (Ibid.) Am I a “conspiracy theorist” if I speculate about the possible implications of the fact that Post Media, the Ottawa Citizen’s parent company; is owned in part by the Royal Bank of Canada?

Canadian Banks’ Façade of Respectability and Stability

Rather than detail the minor suffering of Bay Street and the financial sector; I will present a few representative examples of the harm caused by their irresponsible conduct. According to Thieves of Bay Street:

Canada’s financial industry is a behemoth, a titan that generally escapes scrutiny, employs armies of lobbyists, lawyers and advertising mercenaries to do its bidding; and with rare exceptions, benefits from a media that doesn’t examine its structural failures. It has acquired a strutting arrogance as a result of having weathered the credit crisis better than its American counterpart, but what gets overlooked – as the industry bamboozles the public about its virtues – are the people it runs over in the dead of night (Livesy)

While Canadian banks are not exactly Ponzi schemes, some parallels exist, as Livesy writes:

…no bank has enough money in reserve to meet the demands of depositors if too many of them suddenly withdrew their savings or investments. For every $20 a typical bank lends out or invests, it has about $1 in cash reserves. A loss of 5 percent of asset value is all it would take to sink a Canadian bank. (Ibid.)

While this seems a frightening prospect, banks are secure in the knowledge that they are underwritten by the Canadian taxpayer through the Bank of Canada; although individual depositors enjoy only minimal protection. While this is bad enough, according to economist Benoit P. Rocher of Desjardins Financial, “The equivalent ratio among U.S. banks is over 25, while that of European banks is approximately 30 and the ratio of the largest banks in the world is over 40.” Such comparisons by institutions like Desjardins influence the public to look favorably upon Canadian banks.

How much is enough? RBC’s Record Profits and Foreign Workers
Apparently, RBC is either having difficulties finding enough Canadian employees to fill the ranks of its burgeoning part-time, benefit-free workforce or it prefers to outsource jobs to even lower-wage foreign nationals. The CBC reported that back in November, 2012, … the bank is laying [laid] off 45 employees in its RBC Investor Services division in Toronto and training foreign workers hired through IT outsourcing firm iGATE Corp. to take over some of those jobs in Canada while the majority of the roles will eventually be transferred abroad. (Financial Post: April 8, 2013.)

In response, “…The Royal Bank of Canada denied reports that it has hired temporary foreign workers to take over its own employees’ job functions adding…that it does work with “external suppliers” to provide certain services both in Canada and globally.(Ibid.) RBC does admit to using outside companies to improve “operational efficiencies” and according to an RBC statement in the April 8, 2013 Ottawa Citizen, “…those who will take on the work are going to be the supplier’s employees.” Is it really necessary to highlight the fact that those 45 Torontonian employees will lose their jobs not to official RBC employees but to private contractors?

Considering the fact that RBC enjoyed a 2012 annual profit of $7.5 billion in net earnings; up from $6.44 billion in 2011; I must ask: how much is enough profit and will they ever be satisfied? How does one comprehend the chilling ruthlessness behind firing 45 people just to “improve operational efficiencies.”

Examples of Canadian Bank Misconduct in the Developing World
Offshore misbehavior by Canadian banks is nothing new. As Todd Gordon writes in Imperialist Canada, “…Canadian banks such as Scotia and Royal (RBC) have a long history of imperialist practice…as one Scotiabank executive remarked a decade ago, ‘We stopped screwing Canadians. Now we’re screwing foreigners.”

Scotiabank in Argentina

The fall of 2001 saw Argentina plummet into, “…one of the worst economic meltdowns of the global neoliberal era.” (Ibid.) Especially troubling to neoliberal ideologues was the fact that Argentina had become the poster child for, “…the benefits of the tough economic medicine of IMF-imposed aggressive restructuring and market liberalization…” (Ibid.) After the Argentine government forbade foreign banks operating in that country from seizing the assets of debtors, “…the value of Scotiabank’s assets dropped by $1 billion…” (Ibid.) and the bank adopted a strategy designed to, “…exploit the financial chaos and hardships Argentinians were enduring.” (Ibid.)

The bank was accused of attempting to move money out of the country and Canadian Prime Minister Paul Martin applied pressure to his Argentine IMF counterpart to treat Scotiabank with greater gentility. Eventually, Scotiabank was charged in an Argentine court with legal disobedience after refusing a court order to release funds for its employees and depositor pensioners. It also refused back pay to 1800 Argentine employees and would not disburse the US $35 million in severance to which they were entitled. In spite of Scotiabank’s public protestations, “…executive Peter Godsoe noted that the losses associated with Quilmes will have no material impact on the health of the bank.’” (Ibid.) Nonetheless, Scotiabank went on to sue the Argentine government for over $600 million.

RBC Cashes in on Iraqi Debacle

While Canada has not admitted its military role in the early phase of the 2003 U.S. invasion and occupation of Iraq, “…RBC was recruited to act as a conduit to Canadian business.” (Ibid.) “In the fall of 2003, RBC joined a consortium of fourteen major international companies, headed by the American bank J.P. Morgan Chase and Co…” (Ibid.). This group was delighted by the U.S. invasion because it brought excellent private sector opportunities in a nation where state agencies had dominated the economy. In spite of political repression and secret police brutality; Iraq under Saddam Hussein had been the most advanced and stable of the Arab states.

Fortunately for RBC, its investments were risk-free since its venture was 100 per cent underwritten by funds from the American-controlled Development Fund for Iraq which is financed by Iraqi oil exports. “In other words, the Iraqi people – severely impoverished, malnourished and insecure as a result of the invasion and occupation-are guaranteeing the financial security of the wealthy Canadian multinational’s investment…(Ibid.) Beyond this, RBC’s Iraqi venture was further backstopped with Canadian tax dollars by Export Development Canada. The only Iraqis who stood to benefit from RBC’s presence were the tiny elite with pre-existing links to Western business. Increasingly, private profit is being facilitated by public risk in a world of harsh free market discipline for working people and generous socialism for corporations.

An Example of Canadian Banking Malfeasance: Canadian Imperial Bank of Canada’s (CIBC) Adventures in Asset-backed Commercial Paper (ACBP):

By 2008 Canadian banks, including CIBC; had lost close to $12 billion, “…in bad subprime mortgage debt.” Most of the suffering was felt by small investors who were horrified to hear, “…CIBC disclose [d] for the first time that it was on the hook for U.S. subprime residential mortgages amounting to US $12 billion and facing a meltdown.” (Livesey)

Nevertheless, CIBC president Gerry McCaughey minimized the problems in spite of the bank’s inability to cover the losses. A sixty-five page report was written by Dr. Gordon Richardson of the University of Toronto’s Rotman School of Management, who concluded that
the bank, ‘failed to comply with Generally Accepted Accounting Principles (GAPP) disclosure requirements…and the information provided pertaining to credit risk was…wholly misleading to the market in general and to class members who invested in CIBC. (Ibid.)
By the end of 2008, the total market value of CIBC’s shares plummeted to $20 billion from $36 billion. Nevertheless, CIBC executives continued to be the highest paid in the banking industry.

With the exception of TD Canada Trust, every major Canadian bank and a number of large European lenders dove into the toxicity of ACBP’s and eventually, mostly small investors bought, “…$5.8 billion worth of this toxic product in their money market funds and brokerage accounts.” (Ibid.) At least 1800 of these small investors lost everything when the market tanked and it was revealed that , “…the Canadian banking industry had been eager to encourage investors to buy products the bankers themselves knew to be unsafe, and then they threw those clients under the bus when it all went south.” (Ibid.) To make matters worse, these abuses occurred in Canada’s supposed regulated and reputable financial sector.

Hopeful Developments in Economics

Hopeful developments in economics may create a saner investment climate that acknowledges the delicate reality of the biosphere and the dangers of the unrestricted growth model that currently dominates elite business thinking. The social science of economics is currently facing a revolutionary transformation that is being stubbornly resisted by the academic establishment of most European and North American universities. As Robert Heilbroner said, “Before economics can progress, it must abandon its suicidal formalism.” He was referring to classical economics’ obsession with abstruse mathematical formulas that have little to do with reality but seek to squeeze the round world into its square holes. This dependence on mathematics legitimizes the dominant version of economics and to a certain extent; protects it from criticism. Financial journalist and Oxford University PhD. candidate Simon Mac offers a number of suggestions to modernize economics and alter it to serve the needs of real people:

Introduce far more historical analysis to the undergraduate curriculum…
Acknowledge in lectures the fierce debates that are tearing the subject apart...
Thirdly, offer more criticism of the mathematical models studied in class…

Economists need to learn how to communicate their message effectively to a wider audience – for mathematical models can only show so much. “Economists must learn to talk in simple, plain English.” (Adbusters: Mar./Apr.2013) Two notable examples of plain-spoken economists are John Maynard Keynes and John Kenneth Galbraith who both endured their colleagues’ wrath for daring to transcend the needlessly-complex jargon of a social science masquerading as an empirical discipline.

Fate of Revolutionary Economists

According to Adbusters contributor Patricia Cohen of the New York Times,

…economists who have challenged free market theory have been the Rodney Dangerfields of the profession. Often ignored or belittled because they questioned the orthodoxy, they say, they have been shut out of many economics departments and the most prestigious economics journals. They get no respect.

Mathematical models and anti-regulation sentiment still dominate most economic departments although the credit crisis has generated some fresh thinking on economics including behavioral economics and the acknowledgement that environmental and social costs must be included in calculations of the Gross Domestic Product. Unfortunately, economists like the pro-stimulus John Maynard Keynes and Hyman Minsky; who predicted the ruinous effects of risky financial speculation; are excluded from graduate level courses. Randall Wray, an economist at the University of Missouri; calls the mathematical model “…the frontier of nonsense.” and states that, “A real shift in economics will come only if there is a wholesale collapse.” Since government insists on seeking guidance from the authors of chaos, perhaps that wholesale collapse may yet occur.

The Occupy Movement’s Perspective on the Market Meltdown

While the Occupiers in Canada and the U.S. may not form the next government, their open and consultative organizational style offered us a useful lesson in genuine participatory democracy; sometimes called anarcho-syndicalism. Most detractors condemned the Occupiers’ ostensible failure to provide “solutions” and fault them for rejecting the formal mechanisms of governance.

In order to challenge financial or any other form of tyranny it is necessary to recognize that,

It’s costly to oppose power…it’s going to carry a personal cost. Power systems, whatever they are, very rarely abdicate their power cheerfully.” (Chomsky: 2013.) Therefore, a long term commitment to facing and managing fear is vital to any form of activism involving powerful organizations and collusive governments that quite prepared to use and abuse power to defend their interests. “So fear is understandable. Nowadays its being enhanced by pretty severe attacks on basic civil liberties. A system of control and repression is in place…” (Ibid.) Progress against such vast power is necessarily slow but when publications like the Financial Times begin advocating for a tax on day trades; it becomes apparent that positive change is possible.

The American Occupiers and their Adbuster advocates are the first ripple of a coming wave of social activism dedicated not to stealing money from “successful” people but to ending corporate domination of the political process by , “…a demand that ‘Obama ordain a Presidential Commission tasked with ending the influence money has over our representatives in Washington.” (Ibid.) As previously-mentioned; Obama’s recent choice of major campaign fundraiser Bruce Heyman of Goldman Sachs as ambassador to Canada indicates that the U.S. political system will be lubricated with corporate cash for the foreseeable future. The Canadian situation differs only in magnitude and the subtly of the nation’s regime of campaign finance. Effective and permanent solutions to Canada’s fiscal challenges will never emerge from the councils of those who stand to benefit from financial and social chaos.